Skip to main content

tv   Bloomberg Daybreak Asia  Bloomberg  May 24, 2017 7:00pm-9:01pm EDT

7:00 pm
♪ betty: wall street climbing to new highs. byicymakers are unperturbed the economy. yvonne: hot or not? the debate, or whirring job market, inflation on the play. betty: short-sellers betting against china. bloomberg, a day of reckoning is coming. yvonne: president trump said it was an honor to meet the pope.
7:01 pm
next up is nato, an organization he attacked during the campaign. we have world coverage here on "daybreak asia," we keep an eye on vienna. betty: opec is meeting there. continuing fallout from the trump administration budget and what the cbo calculated on a health care bill. this is "daybreak asia," live from our new york and asia headquarters. i am new york -- i am in new york, it is just after 7:00 p.m. yvonne: i am yvonne man. it threw us off guard. everyone raising rates. perhaps that means a june. by another word, prudent. caution from the fed about when we could come out of this. betty: you have to look at the data and not blame the fed for giving mixed signals. data itself is showing mixed
7:02 pm
signals in a consumer confidence, consumer spending, diverging. you have a job market so hot in the u.s., but then inflation is so not hot. what is going on? you cannot blame the fed for putting their feet in both areas right now. in any case, market investors really parse those minutes. the focus may soon turned toward opec with that meeting underway in the nfl. here in asia we are looking ahead to singapore gop numbers and the bank of korea's decides today. let's see how new zealand is trading. to four daysing on of gains. economists expecting a budget surplus. stocks flat the first couple minutes.
7:03 pm
australia, a strong crude rally leading up to vienna. we did see consolidation overnight. but it seems we are back on this bullish momentum, $51.53 a barrel. aussie stocks looking soft but upwards for the open of the asx 200. japan, the dollar slipping along with treasury yields after mixed signals from the fmoc. the yen.or we will take a look at chicago nikkei futures. that was a look at the region this morning. it seems the fed minutes have a little bit for everyone. betty: very similar charts, to the futures on stocks. across the green board. stocks climbing to fresh records. the s&p finishing the rebound from the huge selloff we saw just a week ago. joining us now on set is su
7:04 pm
keenan for what is behind all of those moves. su: let's go to the closing numbers. green across the screen. if we go to the big movers, a variety of moves pushing stocks higher. , theyombie of -- pushing may make a deal or offer with american eagle. depot, a big company in home renovation business. lowe's is not benefiting. puma biotech surging, sums up to early signs of a breast cancer therapy. if we go into the bloomberg, let's get to the meat of the matter. it white line, the s&p 500 heading toward records. the blue line is the broadest measure, the small cap indexed. -- index.
7:05 pm
it is sensitive to the dollar, which is weakening. --is on track for its worst its worst stretch in seven months. let's take a look at tech stocks which are vulnerable if there is a u.s. slump. it let's take a look. what this chart will show you is going back to the 1990's, that big peak in a ratio between s&p 500 and the 200 week moving average. that is a momentum indicator. and analyst shows the highest level for that indicator since the big tech boom. that tells us some attack is vulnerable if there is a pullback in the economy. yvonne: we have a countdown down to the thursday opec meeting. given the lead up we have seen and the nine-month extension, it is enough to keep the rally going? su: u.s. traders believe the nine-month extension, we do not see oil above $51.
7:06 pm
it was slightly down by the close. a little movement in extended hours. let's hear from top strategists on what will happen. >> opec's has boxed itself into an outcome. they have been telegraphing it now for weeks. chances of a surprise are pretty small. small surprise, but let's go back to the bloomberg. smart money is taking money off the table on those bullish positions. the blue line is the wti. the yellow line is the mid-average and long-term positioning. comes waye the spike back down to average. looks like traders want to be careful as they go forward from after the meeting. you never know what will happen with opec, saying one thing and doing one thing is another when it comes to the opec minutes. back to you. yvonne: i will be watching out for those hints.
7:07 pm
first word news with paul allen. greater manchester police of carried out a rate across the city, saying monday's suicide bombing was part of a network of potential terror. six people have been arrested since the attack and security stepped up across the u.k. british and french security officials say the suspect, salman abedi, was known to them. he had recently traveled to syria. his father and brother have been detained in the libya. a suspected suicide bomber killed one police officer and wounded nine more in an attack near a bus terminal in jakarta. the initial investigation shows that were two blasts and the bomber also died. indonesia has crackdown on militants since the 2002 bali bombings that killed 202 people. more threats have come from extremists who sympathize with the so-called islamic state.
7:08 pm
a pullback in credit will send shockwaves through the economy. the muddy waters founders said he expects china's credit problems to reach breaking points with the system increasingly vulnerable. in september, they claimed it is worth 20. in march.sank 75% has been so much value destroyed. it is my firm belief that you cannot -- at some point, it will catch up with you. you just do not know where that will be for china. you can watch more of our interview with carson block on a.m. in asia at 8:40 hong kong, 10:40 a.m. in sydney. -- it remains at 1.5%. three years after the military seized power, thailand's economy
7:09 pm
will remain sluggish. weakest growthe among developing nations in the region. the u.s. is giving up security measures at 12 -- stepping up security measures at 12 airports. the transport security administration says devices larger than smart phones be x-ray screened individually. other carry-on items may also be checked separately. tsa says the measures may be rolled out to other airports later. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. fed policymakers still betting on a rate rise when they met earlier this month. they were preparing to discuss trimming a record balance sheet. what surprised, their admission a rate hike may have to wait. kathleen hays putting the minutes under the microscope here. sorted out for us.
7:10 pm
i think they expect to hike the key rates in june. it is interesting big knowledged some of the data have been soft. the word transitory seems to out these minutes. it would be prudent to make sure it is transitory before you make a move, that is key. the first statement, toward the end, i will read you something. came inmic information line with expectations, it would be appropriate to take another step to remove accommodations. a rate hike.d let's look at some of the numbers, the issues the fed is looking at. the first has to be the consumer. the first quarter gdp was week. weak.l -- the labor market and higher spending. turquoise line, spending
7:11 pm
went flat, to zero in march. consumer confidence is rising. consumer confidence is not the best indicator of spending. but if i was the fed i might say, this was temporary. first quarter was weak, but spending will go up. also important to the fed, inflation. they saw softer inflation respecting transitory factors. but there were a few concerns that inflation progress may have slowed. jump into the bloomberg again. what you see now is the headline number on the deflator, above 2%. it is back down to just over 1.8%. it is even further away from that yellow 2% target line, down to 1.6%. inflation not showing what the fed wants to see. the fed included this statement. generals agree it would be prudent to await information indicating the slow running --
7:12 pm
the slow pace before taking another step to remove accommodation. they have opened the door to looking at the data in the next three weeks, discussing it, deciding if something more permanent could happen or if they could go ahead and do the june rate hike. yvonne: they have opened the door to the discussion on balance sheet lands and when it starts to unwind things. they want to impose caps. how will that work? sheet,n: the balance let's say $100 billion of bonds will mature. $100are taking that whole billion and reinvesting it. under the new plan, they will set a cap. instead of reinvesting everything, we will allow up to $10 billion to actually run off. that is what they would cap. anything under the cap would be reinvested. every three months we will watch the markets, raise that cash.
7:13 pm
more bonds will actually roll off. they will keep those caps in place until the balance sheet is normalize. they say it is consistent with a gradual system. they also need to flesh this out more and have the markets see what they are actually doing. but they were conditional. they said nearly all policymakers indicated as long as the economy and the fed rate is expected, it would be appropriate to begin reducing the fed's balance sheet. expected, they say they are watching the economy closely. we did see bonds rally a bit. the rate hikes have not changed. are up around 85% for the june hike. some people think it is bullish for bonds. did not change the baseline. a lot of people are betting the economy will pick up in the second quarter. that is where we are now. yvonne: the fed keeping
7:14 pm
flexibility. kathleen hays, thank you. next, highland capital trey parker joins us to discuss when we will feel the effects of higher rates. betty: and, developments in the end, opec preparing. we will hear from the energy mr. -- minister. this is bloomberg. ♪
7:15 pm
7:16 pm
♪ betty: we are heading to asia's first major market open this morning. look at japanese futures, pointing to a lower open, surprising after the record run we saw today in the u.s. markets. down 0.10%. i am betty liu in new york area yvonne: i am yvonne man in hong kong. let's look at business headlines. to settling anear fed inquiry into how billions of dollars was moved from the bank out of russia.
7:17 pm
a deal may be announced soon. million follow the $630 deutsche has are repaid to the u.k. and new york state to resolve money laundering accusations. it centers around how clients moved $10 billion out of russia from 2011 to 2015. betty: a company seeing growth in personal computers and printers for the first time in more than half a decade. revenue rose almost 7% through april 2 120 $2.4 billion, topping estimates for the fourth consecutive quarter. stocks rose, with the company forecasting more figures to come. stake in4 million video, the biggest for the graphic chipmaker. softbank has an unspecified holding. biggestn to be the investor over the next decade,
7:18 pm
betting on trends, such as artificial intelligence. toward aes pointing rate hike. $4.5 billion balance sheet. what are his misses and consumers -- when our businesses and consumers going to feel the impact? bring in trey parker from highland capital management. give me your short take on the minutes today. trey: we think the fed is migrating toward normalization. they have put caveats in in terms of data. but we think they are set on a hike in june. that is a near certainty. betty: you think they are dead set on a hike in june, why is that? the: they are so far below normalization process, they need to move. while there was temporal softness in q1, there is later in theoption
7:19 pm
year to hold back on further cuts. june is a foregone conclusion. betty: let's bring up this chart that kathleen had used to show our viewers. it is taking a sampler of two pieces of economic numbers. is can see the aqua line consumer spending, which recently has started to tank. consumer confidence continues to go up. it is a little bit confusing. it is just one example of confusing economic data we have gotten. you look at that and say, that aqua line is a transitory number, then? there are a lot of other impacts on the consumers. confidence remains high, people remain optimistic from a small business and employment perspective. other things are drowning out consumer spending. rising health-care care costs and uncertainty from the health care plan perspective is a big reservation for a lot of
7:20 pm
consumers going out and spending incremental dollars. yvonne: we know rising rates are imminent. but you have been doing research of one impacting the consumer. we saw the drop in new home sales last month out in the u.s. yet, mortgage rates have come saw in marchwe after the surge with the election. how much higher do rates near -- need to go before we hit that? housing is so strong. the average housing price or monthly payment for housing is so far below where it has been in historical trends, we think the housing market can absorb 1% to 2% move in mortgage rates. there may be a temporary blip from an affordability perspective. we do not think it has a negative impact on volumes, sales volumes. yvonne: you talk about the 10
7:21 pm
year yield, that forecast further and further away from 3% for 2017. why do we see this rapid change of heart? from theappointment trump in terms of their growth agenda or the economic data? trey: there is already a pullback in the trump trade, in terms of people's expectations around tax cuts and deregulation having an impact on equity markets. some increased level of uncertainty in economic data is causing people to maintain their year fromg in the 10 a liquidity perspective and risk mitigation perspective. yvonne: stick around, we will talk more about china after the commercial break. we will talk to the mainland. this is bloomberg. ♪
7:22 pm
7:23 pm
♪ betty: this is daybreak asia, i
7:24 pm
am betty liu in new york. yvonne: i am yvonne man in hong kong. i downgrade of china's sovereign grading is reducing companies reliance on funding. it is not so much a surprise. take a look at my bloomberg, you can see why we are seeing this trend in china. it speaks to what many watchers are saying. strong, bar is going while growth, the white line, is stabilizing. we have gone from credit-fueled growth of 15% a decade ago, the china getting closer to a growthless credit. let's bring back trey parker, head of credit at highland capital management. i know the market is shrugging off this announcement. psychologically, is this a big reality check for china? i think there was already an expectation china was feeling
7:25 pm
growth through incremental credit occurrences. that was already a reservation for the market. given so much of what they did in china was internal, inside the country, there is a little external, 3% to 4% of debt is external, they have concern it will implicate massive increases in cost financing. yvonne: that is true. but when i look at a story like noble i get worried, this global trend of investors piling into the high-yield markets with a little regard to credit fundamentals because of a insatiable hunt for yields. take a look at my bloomberg again. we have the corporate picture, where moody's credit rating -- we see more downgrades than upgrades this year. we are nowhere near where we saw in 2016. do you think credit conditions are deteriorating yet -- less?
7:26 pm
is it a healthy trend? is trending worse, if you will. the dynamic we are seeing is a pressure on the financial systems. china sees an opportunity with growth stabilizing to actual contract some of the financials and systematic risks inside of china. there are asked to have enacted to reduce the risk on the banking system. that is probably more of what is going on than an actual slowdown in corporate credit growth. from chinant to move to japan, because it looks as if maybe they are seeing signs, green shoots we are calling it, in japan. what does this mean for yields in japan, and credit? trey: the bank of japan continues to anchor yields at zero. that seems to a finally started
7:27 pm
some level of growth and inflation inside the country. we think it is a potential positive for japanese equities. we have seen an incremental level of interest in a risk assets from japanese investors with high risk corporate credits, and investors moving into japan. betty: it has helped of the equity markets. what about the debt markets? trey: the establishment of credit markets inside japan, again, not so much of a high-yield market but more of a bank-oriented market. credit conditions have not shown material weakness in japan. betty: thank you so much, trey parker, partner and portfolio manager and head of credit at highland capital management. ahead on daybreak asia, we take a look at president trump cost next stop, the nato summit in brussels, where the manchester attack on extremism expected to be a major talking point. this is bloomberg. ♪
7:28 pm
planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business.
7:29 pm
7:30 pm
morning in hong kong. finally catching a break on the rain we have been seeing the past couple days. minutes away from asia's first market open. betty: it is 7:30 p.m. wednesday in new york where markets closed higher. record highs. of a&p 500 up 1/4 percentage point after the fed minutes. i am betty liu in new york. yvonne: i am yvonne man in hong kong. now to first word news with paul allen. >> the latest fed minutes indicate a rate hike in june with reserve officials judging the time would soon be appropriate. is minutes show a hike
7:31 pm
economic indicators remain in line with expectations. three increases, including the one in march, are forecasted this year. there is a $4.5 trillion balance sheet. u.s. banks given a competitive rivals,er european facing up crackdown over lending to highly indebted companies. the ecb published a blueprint on guidelines of the leverage to lending. at a time when the trump administration wants to ease regulations on wall street. they are enforceable in where the jurisdiction. philippine president rodrigo duterte says he may place a whole country under martial law if it spreads to the south. speaking after his trip to russia, if the so-called islamic state is seen expanding influence, he may make the nationwide order. the imposition of martial law is expected to last 60 days.
7:32 pm
tennis superstar serena williams joining the board of polling with surveymonkey to advocate for diversity in silicon valley. she will be alongside with facebook's coo sheryl sandberg. she wants all voices to be heard. she also said surveymonkey is the right thing for her. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. paul, thank you. let's get more to what we should be watching as trading gets underway in asia. adam haigh joining us live from sydney. this said hike in june seems like a done deal now. what is the likely reaction we will get from asia this morning? adam: good morning. investors digesting those minutes. they are quickly moving on. we have not seen pronounced moves in markets.
7:33 pm
we had a run-up in treasuries, a bit of strength and aussie bonds this morning. but there is no lasting impact. it is all around the balance sheet timing and the investment of whether the fed tells is a bit more about when that is likely to start in the upcoming months. that is a key point. the markets in asia are focusing on the continued strength in oil, running into that opec meeting in vienna. oil continues to push up in early trading today in asia this morning. we are watching that closely. the bank of korea interest-rate meeting later this afternoon. the local stock market their posting a record high yesterday. optimism around the economy there. it will be interesting to see those comments in a statement from the bank of korea later. betty: south korean stocks are closing yet another fresh high on wednesday. is one of the most attractive markets in asia.
7:34 pm
but some crack's are starting to show, right? indeed, money is being pulled from some big south korean equities. if you have a look at this chart, it shows pretty clearly, big outflows coming. in asian equities, the outflows coming out of south korea are the biggest of any other country. this is in the context of the kospi having a great run this year. it is one of the out performers of the region. the bullishness is intact. people are prepared to buy into the idea of better dividend payout ratios, reform of the chaebols, and continued optimism over the correlation between the local economy and its ties to global trade will continue to push equities higher. around whether
7:35 pm
valuations have gotten stretched and may be gone too far too fast. the shares, itf in new york. there at 8%, the highest since the start in 2016. almost two or three times what they were at the start of this year. people betting on a bit of a comeback in south korean equities. betty: thank you so much. adam haigh with a look at the market. less than an hour away from the open in south korea and japan. the congressional budget office releasing its core of revised health care plan asked by house republicans earlier this month. let's get a breakdown in washington. kevin, break it down for us. the bottom line, what the cbo said. after some amendments were adopted to get it over the finish line, it will cost more than the previous version.
7:36 pm
less deficit saving, only $119 billion over 10 years. 23 million americans will lose insurance over the next decade. that is one million fewer than under a previous version. overall, it found a series of provisions were added to get those holdouts among conservative republicans, a few moderates. provisions aimed at introducing flexibility into the insurance market. a fair amount to destabilize it. it caused premiums to go up a lot for sick americans, older americans, and potentially pricing people out of health care entirely. yvonne: it seems like there were some improvements. but still, big questions on what the fed would do. they are making their own version of this. do you think they will revise his current legislation from the house or ignore it? changes do think these and the way the cbo found those
7:37 pm
changes are likely to play out make it that much harder for senators who have to figure out how to explain and fix things. it might well mean they have to aange even more or start over bit more completely than they were intending. the meeting behind closed doors, it has not been sent over to the senate. but if itore helps, does not clear the way, there are a few things that need to be ironed out before it makes its way to the senate, where they are trying to figure out how to craft something that can attract 50 votes among republicans. it will not be an easy task and will take a long time. yvonne: 23 million losing coverage could be a thorny issue, for the democrats as well. thank you. president trump's whirlwind world tour. remember, he was called outdated during the campaign.
7:38 pm
security measures topped his agenda at the high-profile meetings in the middle east and rome. ramy inocencio has more on the latest. ramy: he is in brussels, talking about how the organization is outdated and obsolete on the campaign trail. in the past few months he has said nato is not obsolete anymore. in terms of brussels, everywhere he has been, he has talked down to people or places. he is called brussels itself, i am quoting, "a hell hole." it is interesting to see what happens when he meets these 28 nato leaders in the next few hours. a couple things will be on the agenda. major things. one will be defense spending, trying to get nato allies to pay up for as much as they promised, 2% of gdp. another is whether nato will announce any security forces that will be sent in the fight against isis.
7:39 pm
this comes against the backdrop of what has happened in the past 24 hours in manchester, united kingdom. a couple dozen people have now been killed and about five dozen people have been injured in that terror attack. that is focusing the conversation on what is happening with terrorism and defense spending here. secretary of state rex tillerson on air force one said he was going to expect donald trump would push nato to ante up and walk the talk on that 2% in terms of funding. take a listen. >> you can expect the president to be very tough on them. look, the u.s. is spending 4%. we are doing a lot, the american people are doing a lot for your security, our joint security. you need to do your share. saying hetillerson is wants the eight nato nations to walk the talk. they need to pay up here.
7:40 pm
hop into the bloomberg. the title here as a percentage of gdp, you can see the u.s. has spent far more than its key nato allies. the white line is through 2015. it shows the u.s. spent 3.3% of its gdp toward nato. you can see it falls as we go along. france in 2015 was 2%, that is the yellow line. 2% for the united kingdom. germany at the number four position in terms of 1.2%. chart,show you this bart a 2016 reading on what is happening in terms of what is spent. the united states. that orange line is the actual amount of money, $608 billion the u.s. spent in nato in national expense -- defense expenditures. billion.is $337
7:41 pm
as we go further along, france .oes not come up to the 2% italy, canada and the others -- other 22 numbers. one expectation is that they may renew their pledge to hit this 2% mark. but not this year, by the year 2024. betty: the european allies balked joining this fight against the islamic. have things changed since then? ramy: yes, especially through the lens of what happened in manchester. according to people familiar with the matter, it seems germany and france have changed the pastds may be in day or two, because of what has happened with terror on the mind, the events happening in the united kingdom. what is at issue?
7:42 pm
whether nato wants to become a full member of this isis coalition. they do not want to send combat troops. but a secretary-general said they could send more troops, but they will not be in combat. they could be in advisory roles, training worlds. thate did support the idea nato should join this isis coalition. he said it sends a strong and clear message of unity in the fight against terrorism. when they start their day in brussels we will see if any of these expected announcements come to fruition. betty: thank you, ramy inocencio. we will hear from the uae minister as opec nations prepare to meet in vienna. this is bloomberg. ♪
7:43 pm
7:44 pm
yvonne: we are counting down to asia's first major markets opening this morning.
7:45 pm
japan futures heading lower tip -- lower today. the dollar-yen the seeing weakness after the fed minutes. i am yvonne man in hong kong. betty: i am betty liu in new york. barring last-minute surprises, the world's major oil-producing nations are expected to extend output curves in the anna faris a. how long are these extensions going to last? the uae energy minister told bloomberg it should be at least six months. analysis ofs on the each individual country and that option. but when you put all of this countries together and external forces in the market, six months, nine months, or more, will come with justification. i think we need at least six
7:46 pm
time for this to happen. we have significant inventories we need to create demand, or a differential between supply and demand. saidur saudi counterpart he would do whatever it takes to move this market forward. position, aree you prepared to do whatever you need to get an agreement? is not individual companies. whatever the organization is a seeing, that this is the best on the market, you will see all in the jcc support that decision. and we have been there the market stabilization from the beginning. i do not see a problem to do what it takes to create the
7:47 pm
market stability. >> i want to take you forward. let's say march of next year, 2018. the federal reserve has to give us an exit strategy. the market is demanding the ecb give us a strategy. for opec, if we extend to march of next year your excellency, what happens then? is it, open the gates? strategyd be the exit at the end of this in march of next year? suhail: i will give you a bit of analysis, first of all, will we discuss the strategy at this meeting? i doubt it. it is premature. we need to give the market more time. second, there are fundamentals in the market. if you are going to put more investment, you will not be able to sustain production. production will decline.
7:48 pm
only a few countries that i can have those capabilities of injecting more capital investment to increase the production in a years time or six months or nine months, to say, i can increase the production to that level. of octoberlevel 2016. >> and you are one of those producers? suhail: we are trying to increase output capacity, not toduction, to $3.5 million, allow to intervene when needed to create market stability. i think that question can be deferred to the next meeting. ofcan i ask you, in terms production and a five-year what i am hearing, will
7:49 pm
we hit the five-year average at the end of the year? say it is achievable by the end of this year. would you agree? suhail: it is difficult to just say yes. because there are different fundamentals in the market we need to look at in answering that question. the shared oil response, the level of inventories, whether it is products or crude. and the politics, that we need to look at. it is difficult to say. but i can tell you that the market economy is going to be significantly more controlled than it is today. i can tell you we will drain more from the inventories.
7:50 pm
we will give more to the differential between supply and demand. yvonne: that was the uae energy minister -- energy minister suhail al mazroui . the anticipation is building ahead of this meeting in vienna. the oil price, we have seen this lead up before this meeting. a lot of anticipation about this nine-month extension. let's look at this chart. there is a lot of excitement. if you look at oil prices in march, we have been stuck in this range of $40 to $50 a barrel. does opec still have the power to control the oil crisis or stop further action beyond march? minister is uae unlikely to discuss an exit strategy anytime soon. but we have seen hints it is possible. betty: what has been interesting
7:51 pm
is what we have seen from the u.s., which we talked about quite a bit. part of the reason we are stuck in this range is, even though they may have been enacting, staying on cuts, shale production in the u.s. has not abated. that has undermined any impact from these cuts. it does not look like a u.s. shale producers will stop. even if prices go lower in this range. oil're looking at producing for the future and global demand. yvonne: we saw u.s. crude inventories shrank for seven straight months. we are still well above that five-year average around this time. still a lot to contend with when it comes to u.s. shale. betty: inventories are not falling fast enough. we will have plenty more opec coverage dropped the day, including an exclusive conversation with nigeria's oil minister.
7:52 pm
that is at 2:00 p.m. hong kong time, 7:00 a.m. in london. we will be listening in carefully on what he has to say about these cuts. yvonne: not just opec. we will have a roundup of stories you need to go in today's edition of daybreak. for subscribers, go to dayb on your terminal. it is also available on your smart phone. customize the settings you want and only get the news you care about. this is bloomberg. ♪
7:53 pm
7:54 pm
♪ yvonne: let's do a quick check of business headlines. a company has been fined $350 million by new york's bank regulator for involvement in a regulation scandal with a dozen big banks in the last five years. staff in new york collaborated to fix currencies, including the
7:55 pm
south african rand, and the turkish lira. they say the bank data little or fx tradingn to business. some see tesla as the next apple-like success or a defunct one time carmaker like studebaker. auto analysts say the stock is at -- out of line with reality. it has surged 42% over the past year and trades well above the average target price. a fifth person has been convicted in singapore, linked to malaysia's troubled 1mdb state fund. fined 6000 u.s. dollars after admitting he made a corrupt payment to an analyst related to the investigation. four people have been jailed over 1mdb. 1mdb faces worldwide inquiries
7:56 pm
but denies wrongdoing. plenty more to come on asia's first major market open, minutes away. shery ahn is watching the open in tokyo and seoul. shery: the overnight session has been about the fed, the fomc. right now as we start the session in asia, we are looking toward that opec meeting. the expectation is that we will see another cut of about nine months. , output reduction reduction, extended another nine months. sessiont the trading underway, new zealand open, slightly positive. when we do get the open in australia in a few minutes, keep an eye on bhp billiton. bhp and shall are going to relinquish their south african oil exploration licenses.
7:57 pm
it fell 2% last session. that is the most since may. keep an eye on rio tinto. on renesas an eye electronics. something to keep an eye on. futures slightly down. that is because the yen is weakening. the yen was stronger in a previous session. we could see some poll, some dragged from a previous session. the kospi, another date upwards. the kospi has been up for the past four sessions. the rsi is in this territory. keep an eye on china, the hang
7:58 pm
seng index. we are expecting an update. for the rest of the day we will be focusing on oil, the opec meeting coming up.
7:59 pm
8:00 pm
yvonne: asia-pacific markets send mixed messages despite wall street closing at a high. the s&p 500 rebounded from last week's selloff. betty: the fed is raising the question of hot or not? the rate debate to balance a boring job market with inflation that seems half-asleep. yvonne: oil producers meet later in vienna. there are expected to announce extended output curves to drain the global glut. betty: and a short seller carson block betting -- continuing to
8:01 pm
bet against china. he tells bloomberg the day of reckoning is coming. yvonne: this is the second hour of "daybreak: asia," coming to you live from bloomberg's u.s. and asian headquarters. i'm yvonne man in hong kong. betty: just after 8:00 p.m. in new york. let's get to haslinda amin with breaking news on singapore gdp numbers. the lion city not cry roaring this morning, more like a whimper. q1 gdp coming in worse than expected, contracting 1.3% quarter on quarter. it is a bigger contraction than previously estimated by the government. the median estimate in a bloomberg survey was for a contraction of .9%, so once again, contraction by 1.3% versus the estimate of .9%. the week performance is due to manufacturing, which continues to languish after 11% growth. they pretty much did about 8%
8:02 pm
construction. also extending its previous decline. the government maintains its gdp forecast of 1% to 3%, likely it says to be higher than 2% barring downside risks. as you know, singapore is one of the most open and trade-dependent economies in the world. struggling in recent years due to a slump in global trade. the outlook has improved on the back of a recent recovery and export demand, pretty much led by china. that is helping to boost manufacturing, electronics in particular. as we saw this morning, domestic focus industries like retail, construction, they remain under a lot of pressure. the services industry accounts for two thirds of singapore's economy. the central bank, the monetary authority of singapore, estimates gdp to be unchanged between 1% to 3%, simply much in line with what the government is saying as well. yvonne: we saw exports picking
8:03 pm
up, but seems like weaker consumption is being offset through stronger shipment numbers. would you say singapore's growth is volatile, recovery is uneven at this point? haslinda: it is pretty fair. it is volatile because it is heavily dependent on exports. it is susceptible to the export demand, which is beyond its own control. it's recovery is uneven. that is why some economists expect them to stick to neutral policy for an extended period of time. this should lessen the odds for a return to an appreciating policy in the october meeting, which is one of the two scheduled meetings for the year. putting dollars against a basket of currencies, it changes the center of a currency ban depending on what it deems appropriate. it doesn't disclose details on the basket or on the pace of appreciation or depreciation.
8:04 pm
once again, a contraction of 1.3% year on year, worse than expected for the first quarter. betty: thank you. we will see how singapore reacts when trading gets underway. in the meantime, a market check with shery ahn. seems like everything is a by this morning. shery: we do have two equity markets strongly in the green. i'm talking about the south --ospi,ause the k gaining .4% at the open. more details later, but that market is clearly overbought, according to the 14 day rsi. we are seeing a little positive sentiment in new zealand, australia, not that much. australian dollar is falling .1%, also because we saw four days of gains in the previous session. we have japan's missed again not budget much.
8:05 pm
that probably has to do with what the japanese yen is doing, unchanged at the moment, but we did see a day of strength for the yen in the previous session. the south korean won going strong, .6% gain. we are seeing brent starting to trade in asia, up .3% while wti crude is also gaining ground at the highest level since april. right now, as we have the s-1 see minutes out, that was adjusted overnight. investors will now be focusing on what happens to opec. when you look at brent, this is for the july contract. you can see prices have risen past the 100 and the moving average. it is close to the 100 day moving average. volume has also been up. investors bracing themselves for the opec decision. the expectation right now is the leaders will extend the reduction deal by another nine
8:06 pm
months. betty: but investors, they are pretty sanguine about south korea. what are you seeing there? shery: pretty amazing what is happening, because i keep saying the kospi has had another record high, yesterday closing on another record. right now it has passed 5100 and 200 day moving average, volume above its 15 day moving average. when it comes to the 14 day rsi, it is past the 70 level and signaling overbought levels. we are keeping a close eye on korea, because we do have the be ok rate decision today. 20 economists all expect no change, because the bok has to keep an eye on rising household debt, especially with the new president coming in. he wants to focus on household debt. we have seen that rise 1.3% in
8:07 pm
the first quarter from the previous three months, and that is just another record. att would put household debt $1.2 trillion, and the pace of that increase is higher than income growth, which is around 2% in the blue line. that is something the koreans have to be mindful of, so the bok expected to keep the rates steady at 1.25%. betty: thank you so much, shery ahn on the markets. let's get the first word news with paul allen. greater manchester police have carried out raids across , said monday's suicide bombing was part of a network of potential terror. six people have been arrested since the attack and security stepped up across the u.k. british and french security officials say the suspect, salman abedi was known to them and claimed he had recently traveled to syria. his father and brother have been detained in libya.
8:08 pm
a suspected suicide bomber killed one police officer and wounded nine more in an attack near a bus terminal in jakarta. police say an initial investigation shows there were two blasts, and the bomber also died. indonesia has cracked down on militants since the 2002 bali bombings that killed 202 people. new threats have come from extremists who sympathize with the so-called islamic state. short seller carson block says he will continue to bet against hong kong listing companies, saying a fallback and credit will send shockwaves through the economy. the money orders founder says he expects china's credit problems to reach breaking points with a system increasingly vulnerable. he claims someone in china is worth close to zero. stocks sank 85% in march. thailand held its key rate near a record low to support an economy lagging behind it southeast asian peers.
8:09 pm
the one-day repurchase rate remains at 1.5%. policymakers are voting unanimously in favor. three days after the military seized power, thailand's economy remains sluggish, with the world bank forecasting it will post the weakest growth among eight developing nations in the region. opec members gathered in vienna -- will gather in vienna thursday, where they are expected to approve an extension to drain the global oil glut. the question to be is how long. leading cartel members increasingly favor nine months, which would take the curves through the first quarter of next year. russia and other independents also support an extension of the restrictions. global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. i am paul allen. this is bloomberg. betty: let's stay with opec and bring in our asia energy reporter, ben. it seems like everything is baked in, that they are going to
8:10 pm
keep the cuts for six to nine months? : it looks like it is going to be an extension. the timing is perhaps the big question here. arabia and russia, the two big members of the group, pushing for nine months. we have a committee to monitor those cuts, recommending a nine-month cut. there are other members, like , that aree uae perhaps saying it is not a done deal. i think we can take from this that there will be an extension. nine months is probably going to be the extension, but we will have to wait and see. yvonne: they have fallen short on going beyond march of next year when it comes to went to extend those cuts, dropping a lot of hints. the russian energy minister was saying they could have the option of an additional three months after the nine. do you think they're going to get deeper? ben: quite possibly. the initial agreement was for a six month cut with a six-month
8:11 pm
option. building and those possibilities -- building in those possibilities is a safeguard. at the moment, stockpiles are stubbornly high. we had saudi arabia earlier saying that six months will be it, but the language changed throughout the year when they realized that the stockpiles were still too high. they were not draining as fast as they could. they need to get the five-year average toward the end of the year. it is opec. opec has the ability to surprise the market. nine months, possibly longer. yvonne: is that still enough to bring down those inventories? ben: that is what the saudi arabians and rest of the cartel, that is what they are thinking. nine months will be at. -- will be it. the wildcard is the u.s. it continues to pump crude.
8:12 pm
we saw the weekly figures last week. u.s. production popped up again, up over 9.3 million barrels, highest since 2015. that is the wildcard. you had the algerian minister this week saying they are not worried about shale, they have hit their limits. it all depends on what is going on there and also compliance in the group, whether they will stick to those cuts. yvonne: we will see if we have any surprises. i'm sure you are anticipating quite a bit. thank you. 5157 for wti this morning. still to come, we review the latest fed minutes and chances for a june rate hike. betty: just ahead, b.n.p. paribas giving its outlook for the chinese financial system after moody's surprise downgrade took everybody off guard on wednesday. this is bloomberg. ♪
8:13 pm
8:14 pm
8:15 pm
betty: this is "daybreak: asia." i am betty lou here in new york. in 2015, renowned a short seller carson block called out noble group for its finances. in the two years since, the singapore listed commodities trader has seen its stock spiral downwards. bloomberg television spoke with the muddy waters cofounder and cio about his call. >> we formed our thesis in 2014. we just didn't feel that we had done the work to go public with it until 2015, and at that point, to be fair, we were following another activist short seller who had put out a pretty detailed thesis, so we felt we could put out more narrowly focused work. regardless, my feeling on noble was that it really effectively always had a book value of less than zero. >> negative book.
8:16 pm
,> yeah, that is what i thought a sober evaluation of all of its agreements and assets would have produced, a negative book value. it looks like that is finally catching up with it. it is kind of incredible to see it take all these years to play like -- yeah, it seems i think they are going to have a hard time escaping restructuring. >> are you still shorting the stock? >> we are not. it is hard to borrow, it is expensive, and understanding when the wheels would fall off was, you know. >> the equity value is already close to zero. >> exactly. >> nobles has hired morgan stanley in an effort to try to thatup some kind of deal would save the company or salvage the situation. what kind of odds do you put on that? -- if everyeally potential investor in the world
8:17 pm
were truly economic or smart, i would put very low odds on that. we see sovereign wealth funds doing some really stupid things, and i am sure that is the first place the bankers are going, the sovereign wealth funds or state-owned and are prices -- state-owned enterprises. one of many sovereign wealth funds that plays in the direct investment space. thomas it bailed out along a few times. i think they would have gone the way of noble back in 2012, maybe 2013, but for thomasic, that would have been the case. i'm sure there are calls being place to them, hopefully they are not that interested in noble. betty: while noble is an extreme case of what could happen when investors lose confidence, as carson block said, it is also a cautionary tale of what could result from too much comfort and
8:18 pm
underlying risk. ,oining us is charles chang head of asia credit strategy at bnp paribas. is noble the canary in the coal mine? chineseseen these property companies in particular cell quite a bit of bonds this year, pretty much chasing the rally that noble did, selling $750 million worth of bonds in march, only to have it lose half its value. are investors underestimating these credit risks? >> what has been happening is that the credit market in asia has been quite healthy with a lot of interest from investors in asia bonds. most of these investors are asian, so they are interested in asian risk and particularly chinese risk. for property developers, the interest in those companies specifically is the fact that they have gone through quite a few down cycles and are somewhat tested in terms of rough waters ahead. for the issuance so far, the
8:19 pm
property developers are particular in that they need capital in order to buy land and grow. their capital needs is an ongoing phenomenon, which they need as the sector continues to consolidate within china. investors having had invested in those bonds for quite a while are somewhat familiar with them. yvonne: with his crackdown on leverage at home, what does this mean for funding costs? if you look at the chart we have, it has driven up borrowing costs when it comes to the onshore market that we see in blue, but the offshore funding costs have come down. could that start to change after what happened to noble and this moody's downgraded china? >> what is happening is the onshore and offshore markets are adjusting to each other. they used to be segregated prior to the opening of the domestic bond market. essentiallythis is in 2015 -- after the domestic bond market opened, the issuers
8:20 pm
are able to issue both domestically and offshore. so the rates started to converge. the market is going through a process of equalizing the two sides. when the bond connect gets launched, perhaps later this year, that equalization will happen more quickly. at various points in time, you are going to have some differences, so what we care about is whether that becomes a trend or not. as it stands right now, the market corrects itself when those differences emerge. betty: i am also curious, as we are talking about these lessons from noble, do you think that investors, because they have got this thirst for yield and that continues, in certain cases they have overlooked the credit risk, particularly when it comes to property, debt issued by property companies? is that still happening? is this thirst for yield really
8:21 pm
driving people to turn a blind eye to some of these risks out there? >> the interesting phenomenon this year is that for much of the year to date, five months, we have seen investors buying up a lot of bonds, u.s. dollar to eliminated, from chinese issuers. the demand has been strong throughout the first quarter. starting in april, we started to see investors differentiating between good credits and that credits, and the performance started to the verge. we are seeing -- performance started to diverge. we are seeing differentiation and hoping to see more. betty: does this moody's downgraded yesterday contribute to another wake-up call? say it downgrade, i must is not particularly new in terms of the factors and rationale. moody's put the country on a negative outlook arch last year,
8:22 pm
-- outlook march last year, hoping for improvements. china is a big ship, so it does take time to steer itself. one year is perhaps not enough time. this action is not a surprise. as such, the reaction is quite limited. yvonne: bringing it back to the property market and what's going on with the credit risk there, if things do turn shallower, how do you see the property market reacting? is it going to be a slow deceleration, or could it be an aggressive correction? >> the market this year for real estate in china needs to correct, because last year was perhaps too strong. last year, you had property prices up anywhere from 15% to 17% across the country. you cannot have another year like that. this year, prices should decelerate and the government wanted to decelerate. it is starting to happen. a major correction in terms of a
8:23 pm
big drop, perhaps not, but certainly price deceleration is expected. to have you, charles chang, bnp paribas head of asian credit. one feature we like to show off on bloomberg is our interactive tv function. you can find it at tv . you can also delve into some of the interviews we have showed off through the morning here, including the one with the uae energy minister. on the right side, you can click on charts we have showcased. you can also become part of the conversation. send me an betty and instant message during our show. betty: we are waiting. yvonne:. send them over. bloomberg subscribers only. check them out at tv . this is bloomberg. ♪
8:24 pm
8:25 pm
betty: this is "daybreak: asia." i am betty liu in new york. yvonne: i'm yvonne man in hong
8:26 pm
kong. today sees another blow for traditional bricks and mortar retailing as walmart opens a flagship e-commerce store. the outlet will offer 1700 of walmart's most popular items, including food, toys, and clothing. anything ordered before 11:00 a.m. will be delivered same-day, great deal. they will have a 20 day return policy that normal walmart stores offer. betty: struggling commodities trader noble hiring morgan stanley as they battle to survive. the stock fell another 8% on wednesday, and a staff memo says the company faces "an incredibly difficult environment." s&p global ratings has flagged a possible default, and noble macie two banks walk away from a credit facility that underpins its key oil business. yvonne: westinghouse says potential buyers have expressed
8:27 pm
interest in toshiba's majority stake, and the sale process should begin in a late summer. it isterim ceo said still too early. toshiba put westinghouse into bankruptcy and has warned the company may not be able to survive as a going concern because of enormous losses. betty: markets have been trading for about 30 minutes in japan and south korea and australia. you can see the nikkei slightly lower, as futures had indicated it would open a bit softer. the south korean market still gaining some ground to new highs, up .10%. he s&p asx 200 in sydney down about .2%. yvonne: plenty more to look into, including the fed minutes and opec meeting. up next, facing a dilemma while the u.s. job market is doing well, prices are not rising fast enough. the rate hike debate, coming up
8:28 pm
next. this is bloomberg. ♪
8:29 pm
8:30 pm
in singapore,:30 half an hour away from trading. gdp opp from singapore -- gdp out, missing estimates. consumption here likely when on this export brash -- likely weighing on the export from the city. a little bit of a whimper for the lion city. i am betty liu in new york. you are watching "daybreak: asia . let's get to the first word news with paul allen. paul: the latest fed minutes indicate a rate hike in june, with reserve officials judging the time to tighten policy would soon be appropriate. the minutes show most
8:31 pm
participants favor a hike if economic indicators remain in line with expectations. three increases, including the one in march, our forecast this year as officials look to shrink the feds $4.5 trillion balance sheet. u.s. bankers could be handed a competitive boost over there european rivals, which are facing a crackdown over lending to indebted companies. last week, the ecb published a blueprint of new guidelines on leveraged lending at a time when the trump administration wants to ease restrictions on wall street. the new ecb standards are enforceable no matter where the jurisdiction. philippine president rodrigo duterte says he may place the whole country under martial law if the violence spreads to the main island. speaking after cutting short a trip to russia, he said if the so-called islamic state is seen expanding its influence, you might make the nationwide order. the imposition of martial law in mindanao is expected to last 60 days.
8:32 pm
the u.s. is stepping up security measures at 12 airports, telling travelers they must screen electronic devices separately. the transportation security administration says devices larger than smartphones will be x-ray screen individually, and other carry-on items may also be checked separately. the tsa says the measures may be rolled out to other airports later. global news 24 hours a day, powered by more than 2600 reporters and analysts in more than 120 countries. i am paul allen. this is bloomberg. betty: thank you. time to see how the asian markets are shaping up. they struggled off the moody's downgraded and said minutes. it is all about oil now. shery: we are past things that have happened in the last couple of sessions. what people are focusing on is the fact that the dollar is softening for a second consecutive session. we are also seeing record lows in the u.s., being felt
8:33 pm
favorably across markets in asia, especially when it comes to currency markets. we are seeing the south korean won gain strength after two days of declines against the dollar. of course, the kospi is on a tear, again at an all-time high. the malaysian ringgit also gaining .3%. the malaysian ringgit is gaining for the fourth consecutive session. it is worth mentioning that malaysia is the only net exporter of oil in asia, so oil prices rising ahead of that opec meeting could be playing favorably into sentiment there in the country. we are also seeing the japanese yen weakening slightly in today's session, after strengthen the previous session, so equity markets in japan still being weighed down by the strength of the previous session. the singapore dollar not doing much, but worth mentioning the gdp there did contract less than estimated, an annualized 1.3
8:34 pm
decline in the first quarter, something we broke about half an hour ago. strongly, focus today as you mentioned, on oil. definitely going to be a big factor for the markets. shery: definitely. it is all about oil. we have the f1 see done with, equity markets on a tear in the u.s., so now it is all about oil. this is a good function for bloomberg users, opec . you can see what they have done when it comes to crude production. we have seen a steady decline since opec production cut deal last year, but we do see saudi arabia being the top producer among these countries, with iraq, iran, and some other countries in the pie chart. you can see how much they have produced when it comes to the total opec production. opec, of course, right now we are expecting them to extend
8:35 pm
that reduction deal by about nine more months, so prices have been going up for wti, brent. wti now the highest since april, 150 andso passing its 200 day moving averages. another function we want to talk about is glc oh, global commodity prices. you can see the energy sector completely in the green, heating oil as well, all in the green. when it comes to metals, you can tell the risk on sentiment across markets. you are seeing gold decline in the asian trading session, after gains in the previous session. we are also seeing u.s. treasury yields gain ground in asia. when it comes to base metals, something to keep an eye on given china's debt rates, that could be something that pulls down the metals in the commodities fear. just -- in the commodity seer.
8:36 pm
phere. but it is fairly early in the trading session. betty: thank you so much, on the markets and oil. minutes from the last fed meeting show policymakers still betting on a rate rise. we are prepared to discuss trimming the record balance sheet. they were surprised -- we were surprised the admission of a rate hike might have to wait. kathleen hays here with some perspective. we are also getting headlines on the president. kathleen: rob kaplan is really sticking to the kinds of things he said before. he still thinks three rate hikes are appropriate, but if the economy grows slowly, there could be fewer. if the grows more quickly, there could be more. he did not talk about minutes. when i came to this report, he had not said anything specific. when we put this in the context of the fomc minutes from the may meeting, we see they were looking at the weakness in the first quarter and seeing it was
8:37 pm
transitory. that word appears over and over. at the same time, concluded it might be prudent to wait and make sure that is the case before they removed more stimulus. here is a sentence where they set themselves up for moving ahead on rates. most participants agreed that if economic information came in about in line with their expectations, it would soon be appropriate to take another step in removing policy accommodation. when it comes to the consumer, the fed seem to look past the fact that we had a week first quarter gdp, due to weak consumption. they expected consumer rebound because fundamentals are solid, and the spending in the first part of the year will be transitory. inflation may be harder to explain away, because inflation has been missing target more than before, most on the fomc saw softer inflation reflecting transitory factors, but if you were concerned inflation progress may have slowed. let's look at the bloomberg chart.
8:38 pm
you can actually see the spending numbers. they are showing that confidence has risen. that is the white line. spending has slowed quite a bit. let's move on to this chart. this is the consumer part we were just talking about, now we are looking at the inflation part. ,he blue line is the headline pce was above 2%, now back down to 1.8%. the court has fallen to just below 1.6%. that may be why the fed concluded this -- members agreed that it would be prudent to await evidence indicating that the recent slowing in the face of economic activity had been transitory before taking a step to remove accommodation. if you are betting that the weakness was transitory and the economy is when to pick up, the fed is going to hike in june, that is easy. that is what the markets are betting. it seems like this is a reminder the fed is watching the data. if it does not add up, and maybe if it slows down, they will skip
8:39 pm
june, but that is not what the market is expecting. yvonne: the special section on the balance sheet reduction plan was a bit of a surprise, kathleen. they mentioned the caps they will have and adjust every couple of months. is that going to be an encouraging sign that we will -- that they will start off slow? kathleen: that is what they said all along, gradual. interesting what they are talking about. this is from a presentation that the staff gave the fed. they included an outline. form -- $4.5 billion on the outline. every month, bonds are maturing and the fed is reinvesting. here is what they are proposing. they will put some amount -- maybe instead of letting everything roll off and reinvest , we will say some are going to roll off and not get reinvested, but we will cap that every month and reinvest the amount that exceeds the cap. every three months, we will see what is happening in raise caps
8:40 pm
if everything is going as expected. this will happen as the normalized. this, too, they said will depend on the economy evolving as expected. rob kaplan said the fed is going to have to be mindful of daily volume as they decide what to let rolloff. in other words, maybe they will say, better not let those bonds rolloff and put more supply back in the market or take supply out, actually. they are going to be proceeding very carefully. betty: what do you make of the mixed market response? kathleen: it was interesting. fed funds futures, world interest-rate projections are still showing odds of 85% for the rate hike in june, but we did see the bond market rallying. we had the 10-year note back down to about 2.25, a little bit of a reversal now. it is hard to see how traders are playing this. there are two different markets. what is going on his people are going to be watching very closely. with the 10 year note yield, if
8:41 pm
we were to extend it back a day, we would see when the minutes came out and the balance sheet plan came out at 2:00 eastern on wednesday in the u.s., you saw a drop in yields. there was definitely a rally in bonds. , the cpills report report, and spending numbers over the next three weeks, very important to the markets. hard to believe the fed is really not going to make the june hike because they have so widely advertised it. minutes suggest that some people seem to think it would not hurt to cause, if the numbers don't add up. betty: the work does show 85.7% toward a rate hike. up next, short seller carson block saying china's credit problems since the global financial crisis will reach a breaking point. we will hear from the founder of muddy waters. also, what tech stock he says is his next target. this is bloomberg. ♪
8:42 pm
8:43 pm
8:44 pm
is "daybreak: asia ." i'm yvonne man in hong kong. betty: betty liu in new york. short seller carson block saying he will continue to bet against chinese is "daybreak: asia compa pullback in credit will send shockwaves throughout the mainland economy. the muddy waters founder told bloomberg expects china's credit problems to reach a breaking point. carson: it is actually very difficult for me to be here in may 2017 and seeing that this -- be here in mid-2017 and see this has not collapsed yet. i have felt for many years it is an enormous asset and credit bubble. you get under the old orthodoxy, that could not be sustained that long, but if you look around the world, you see that the ecb, the fed are helping to sustain frothy asset evaluations.
8:45 pm
japan hasn't made sense in a few decades. so the china question is really how long they can keep it going. i don't have a view on this. i think ultimately, there will be a day of reckoning. i know that, i just can't tell you if it is two years or 20 years. >> you don't have a view of the timing, but you do feel certain of the outcome. carson: yeah, they have been destroying value, destroying capital for so many years through their fixed asset investments. the one thing, the one cushion that china has -- this is something that there is a lot of debate about how bad, how hard a landing you will get in china. the one cushion is that it owns the banking system. china's reaction to the financial crisis in 2008 was to cram liquidity into the banking system, but through almost
8:46 pm
nonexistent controls, i would argue, that went straight into real estate domestically, and a lot of it fled the country, went into real estate on the west coast and canada and australia. there has been so much value destroyed that my firm belief is you cannot -- at some point, your past sins catch up with you. i just don't know when that will be for china. >> if timing is impossible to predict -- which i don't want to put words in your mouth, but sounds to me as though that is what you are saying. what about those people who have chosen to short china, whether it is through the chinese currency or other instruments? that sounds like the kind of trade that has lost people money in the japanese government bond market for years, a widow maker. carson: there are certainly ways you can play china that our company-specific. there are a lot of chinese companies that are publicly
8:47 pm
traded, some in the u.s., a lot in hong kong, and many of them are very poor quality. you can -- i wouldn't want to take a purely macro thesis and say, i'm going to short china. i would not want to short the hang seng index. if you start with a macro thesis and say, there are a lot of credit problems in china, and then you start looking at industries that might be canaries in the coal mine or companies that might be canaries in the coal mine, then you can get it right. the flipside is there are companies that just won't be allowed to fail. there are companies that don't make sense on many levels that somehow keep going. so understanding which companies, for whatever reason, ability to keep it going is challenging. >> what about the ball case -- the bull case?
8:48 pm
people say xi jinping is determined not to let the economy collapse, determined not to let bad loans consumed the banking system. they have started to crack down and select places. your point, the government does have a lot of control over the financial system and the economy. at the least, maybe they will muddle through. carson: that is when -- i always crack a smile when i hear western-trained economists say things like that. it is this tremendous cognitive dissonance. these are often the same economists who, the moment the u.s. government bought nonvoting shares in banks to capitalize them, freaked out, saying this is horrible, the death of markets. a lot of the same economists look at the chinese leadership and say, in this clause i command economy, this is -- in this quasi-command economy, this is brilliant.
8:49 pm
these guys are no more capable than policy makers in the u.s. truth be told, as screwed up as our government seems at times, the united states government has the most power in the world to avert a major economic catastrophe. if they weren't able to do it, it is because the laws of economics, almost the physics of economics, eventually catch up. and no matter how brilliant xi jinping is -- by the way, pretty much everyone in the chinese leadership is an engineer. i'm not saying they should staff their government with lawyers, but there is a lot of intellectual, very incestuous intellectually. i'm not going to bet these guys can escape the laws of economics in perpetuity. betty: again, muddy waters founder carson block speaking to erik schatzker on china. they were both in san francisco. they had to talk technology. there was one stock, tech stock,
8:50 pm
that carson said he is looking at in his bullseye as a short. that is snapchat. listen to what he said about that. carson: we have got corporate governance concerns, some well-known, but there are also real questions about the ethics of the company. that is something not well-known. arealso -- and this is the where we are really trying to form a view -- questions about the business model and strategy. betty: the ethics, talking about culture we have been hearing about, all around silicon valley. i think really what he is talking about is the competition from facebook. facebook has almost one-for-one copied everything snapchat has done, and it is working. there is reports out there that is slowingrket share
8:51 pm
from snapchat -- is flowing from snapchat back to facebook. there are concerns whether they can beat the big giant. yvonne: i have to admit, i am one of them. we use instagram stories. i don't think i use much of my snapchat at all. that could be a big problem. they call instagram the next facebook. the best defense against snap. they have to keep wooing users. can they build the ad revenue? carson said it right, snapchat has to move faster than facebook. interesting talk from the muddy waters founder. betty: you can get a roundup of all these stories that you need to know to get your day going in today's edition of "daybreak." bloomberg subscribers go to dayb on your terminals, also available on mobile. you can customize your settings so you get the news on the industries and assets you care about. this is bloomberg. ♪
8:52 pm
8:53 pm
betty: this is "daybreak: asia." i am betty lou in new york. yvonne: i'm yvonne man in hong kong. deutsche bank is said to be near to settling a fed inquiry into how billions of dollars was moved through the bank out of russia. a deal may be announced soon.
8:54 pm
the $600 million deutsche bank has already paid to resolve money-laundering accusations. the investigation centers around how clients move $10 billion under pressure from 2011 to 2016. betty: sales at hp have been rising, with the company seeing growth in personal computers and printers for the first time in half a decade. revenue rose almost 7% through april 2 $122.4 billion, topping estimates for the fourth consecutive quarter. the stock rose in extended trade, with the company forecasting more good figures to come. yvonne: softbank is said to have amassed a $4 billion stake in nvidia, making it the fourth largest stakeholder. softbank discloses unspecified holdings when it wrapped up my shield she suns $93 billion vision find in the weekend. it is said to be the biggest investor in tackle the next weekend by betting on trends such as artificial intelligence. betty: wall street remains split
8:55 pm
between those who see tesla as the next apple-like success or as defunct as one time carmakers to the bigger. tech analysts see the company with the potential to shake up the industry, while auto analysts say the stock is out of line with reality. it has surged 42% of the past year, now trades well above the average target price from analysts surveyed. yvonne: that is almost it for us here on "daybreak: asia." a quick look at what is coming bloomberg markets. haidi is watching action out of korea. haidi: we are not expecting much, more about the press conference. economists we have spoken to expecting their staying on hold today. their hands are tied, dealing with this household debt ratcheting up but also potentially what they would do if it is cut with place a burden on the repayments.
8:56 pm
looking on comments on growth and inflation that were raised last month, but that does not take into account the fiscal splinting plans by the new president moon. continuing also to parse his speakersfrom the fed's we're hearing from today, and taking a look at the bank of thailand decision. that is sort of the central bank themes we are watching today. betty: also, you are watching noble again. who do you have on to talk about this? haidi: the continued implosion of what was asia's largest commodity trading house. we will be speaking to margaret yang, a strategist who covers noble, talking about what comes next for this company. reports that some of these white knight investors like sinochem may have walked away. what it means for this company's debt, what will happen with its oil business, really digging deep into what happens next with noble group. we are also taking another look
8:57 pm
at this moody's downgraded china yesterday. we will be speaking to china's homegrown ratings agency. it is interesting the cousin, they have taken very contrary views compared to the other big three ratings agencies. speaking to the global credit rating head of the ratings team at 40 minutes past 10:00 in hong kong. that will be interesting, because i am sure he has a different view than moody's and the rest of the ratings agencies. of course, all the action on markets as well over the next couple of hours. plenty more to come. this is bloomberg. ♪
8:58 pm
8:59 pm
9:00 pm
♪ it took me a while to learn how to pronounce it. >> you had a losing record, then you won the national championship. >> we ended up winning one of the greatest games of college basketball. >> you won your third gold medal. >> the international anthem being played, nothing better than that. >> will would you say is the most important lessons of leadership?

10 Views

info Stream Only

Uploaded by TV Archive on